1. Field of the Invention
The invention disclosed herein relates generally to the recovery of losses associated with unauthorized use of negotiable instruments, and more particularly to a fraud protection system and method for enabling a consumer to recover losses due to forged signatures, forged endorsements, or altered information on personal checks.
2. Background of the Prior Art
Attempted check fraud at commercial banks is a growing problem. Check fraud can be one of the most damaging personal frauds. A victim of check fraud can suffer not only loss of all their financial holdings, but damage to their credit report as well.
Check fraud is generally perpetrated in one of several manners, such as:                FORGED SIGNATURES—legitimate blank checks with an imitation of the payer signature;        FORGED ENDORSEMENTS—often involves the use of a stolen check, which is then endorsed and cashed or deposited by someone other than the payee;        COUNTERFEIT CHECKS—due to the advancement in color copying and desktop publishing capabilities, this is the fastest-growing source of fraudulent checks today;        ALTERED CHECKS—information on a legitimate check, such as payee or check amount, changed to benefit the perpetrator; and        CHECK KITING—the process of depositing a check from one bank account into a second bank account without the sufficient funds to cover it.        
According to a leading accounting firm, more than 500 million checks are forged annually, with losses totaling more than $10 billion.
According to the National Check Fraud Center, check fraud and counterfeiting are among the fastest-growing problems affecting the nation's financial system, producing estimated annual losses of $10 billion, and continues to rise annually at an alarming rate.
According to a report issued by the American Banker, an industry bankers' magazine, estimates of losses from check fraud will grow by 2.5% annually in the coming years.
Many processes and techniques have been developed to thwart the growing problem of check fraud. Special inks, microprinting, encryption of machine-readable code, and specially designed checkbooks to disclose loss of checks are some methods suggested to guard against check fraud. Even with the multitude of schemes to prevent incidents of check fraud, the continued growth indicates that most courses of action are ineffective in preventing such occurrence, such that consumers continue to lose significant funds through the ongoing check fraud ailment. Efforts must be directed to recovery of losses attributed to such check fraud.
Ordinarily, for a consumer to recover losses arising from victimization by check fraud, such consumer must generally investigate the fraud on their own, report such fraud to their bank or financial institution to seek reimbursement, and initiate criminal and/or civil proceedings as appropriate, if necessary. Such steps are generally unfamiliar to the average consumer, and the apprehension of such tasks can present a barrier to entry.
Accordingly, there has been found to remain a need for a simple method for a consumer victimized by check fraud to recover from losses associated with specific forms of check fraud, such as forged signatures, forged endorsements, and alterations to legitimate checks.